Is the Internet a Big Bluff? Lewis Plays Hacker’s Poker

“By its nature,” writes Michael Lewis in Next , “the Internet undermined anyone whose status depended on a privileged access to information.” Mr. Lewis means doctors whose patients arrive for treatment having just downloaded the last dozen issues of the Journal of the American Medical Association , and investment analysts barked at over the phone by clients who’ve read earnings reports published 10 minutes before. But journalists have been similarly undermined. When everyone has the “facts,” those who gather them become mere technicians. The journalist’s value-added now comes from brio or brain power, and Mr. Lewis, who catches on quick, has always been hell-bent on piling both into everything he writes. He may not have been the first writer to gape at the monomaniacs of 1980’s Wall Street, but he was surely the first–in Liar’s Poker (1989)–to dub them “Big Swinging Dicks.” The dorkier the information, the more likely he is to impart it in wowie-kazowie prose.

In Next , he clumsily braids together a half-dozen magazine stories about some wacky characters who have crawled out of the Internet-age wiring. This is not Mr. Lewis’ most ambitious book. In his high spirits, he seems not to notice when he uses “thwart” to mean “flout,” or “impunity” to mean “ease.” His metaphors have a tendency either to come apart (“There’s a moment when the center feels in its bones that the ground beneath its feet is moving, whether it likes it or not”) or to importune the reader for a laugh (“Frankel’s code was the commercial equivalent of a fart joke at a formal dinner party”). But to the cliché-strewn field of high-tech, Mr. Lewis brings both a businessman’s rigor and a dyspeptic independence, and those gifts carry the day for him. Next is an uneven book, annoying at points, but it’s consistently smart, and its high points are among the high points of Mr. Lewis’ writing life.

One of these is a visit to Jonathan Lebed–the 15-year-old from New Jersey who used the Internet to “manipulate the stock market.” After Jonathan finished fourth in a children’s stock-picking contest sponsored by CNBC, his parents opened an Ameritrade account for him. In a year, he turned an $8,000 savings bond into $28,000. By the time the Securities and Exchange Commission caught up with him, he’d turned that stake into three-quarters of a million dollars by investing in stocks he’d talked up on Yahoo.com.

It initially puzzled Mr. Lewis that the S.E.C. let Jonathan Lebed keep two-thirds of his booty. The reason? The S.E.C.’s case against him, Mr. Lewis shows, was extremely weak, and they were scared he’d talk. The boy was not misleading people; he traded and pontificated under his own e-mail names and exposed himself to the same risks as those who relied on his advice. That the advice was good–so good that his schoolteachers routinely begged him for tips–is not particularly surprising. According to a 1999 Bloomberg study, fly-by-night stock analysts are on average 21 percent off-target; their competitors at the Wall Street firms are off by an average of 44 percent. When Mr. Lewis describes how brokerage houses collect commissions from the companies whose stock they’re selling, or how J.P. Morgan Chase sends advance warning to companies they’re planning on downgrading, the reader cannot but come around to his populist view of the case: that, in the eyes of the S.E.C., Jonathan Lebed’s crime was that he was too lower-class to engage in what all stock advisers do.

Mr. Lewis cannot disguise his bemusement that his Internet reporting keeps leading him to teenagers. If there is a technological revolution going on, it’s being led by a children’s army. Fifteen-year-old Marcus Arnold, child of Belizean immigrants, gave such good legal advice on AskMe.com’s criminal-law page that he wound up ranked first on its panel of experts, ahead of dozens of criminal lawyers. In England, 14-year-old Daniel Sheldon parlayed his role as a guru of Gnutella (a file-sharing code that, unlike Napster, bypasses central servers) into another role, as a guru of anti-capitalism. Young Daniel thinks all intellectual property ought to be free. “We’re out to make a network,” he says, “that benefits us all and isn’t governed or monitored or censored by anybody else, just us, and we’re in control of the network.”

Mr. Lewis is cynical about the kind of adult Daniel Sheldon will turn into, since “[i]nside every alienated hacker who thinks he stands for the ‘good things that ultimately don’t matter to most businesses,’ there is a tycoon struggling to get out.” But he takes very seriously the way the Internet has “redistributed the prestige and authority” away from adults and toward children. “[W]hen capitalism encourages ever more rapid change,” he writes, “children enjoy one big advantage over adults: they haven’t decided who they are.” He quotes economist Paul Romer of Stanford University, who thinks the very idea of filial piety may be collapsing in the face of technological change: “It may be that we are moving to a model where the peak earning years occur before a person is thirty years old,” Romer says, “after which he effectively retires. It’s the pro athlete model, extended to everyone.”

Halfway through the book, Mr. Lewis takes up what adults are doing with computer technology. The answer is: mining data. As the chief executive of a company called DoubleClick notes, “personal information is the oil of the twenty-first century.” Knowledge Networks is offering free WebTV and Internet access to a quarter-million Americans of all backgrounds in return for a semi-permanent opinion-polling relationship. This, eventually, will allow politicians to understand voters’ needs almost perfectly. As Mr. Lewis points out, Americans tend to ask only one thing of democracy–that it become more “direct” and less parliamentary. The likely outcome, he is right to fear, is a “world in which politicians become so well informed about public opinion that there is no need for direct democracy.”

The commercial implications are even more powerful than the political ones. Two Silicon Valley companies–TiVo and Replay Networks–have sold a few hundred thousand black boxes that, a decade from now, will allow you to store an entire Blockbuster video outlet’s worth of movies and programs for about 100 bucks. The catch is that the box will record everything you do with your television, so that networks can more effectively target ads at you. Commercials can be slipped in at the moments you’re most glued to the box–and for products your viewing behavior has shown you like. This data is so valuable to corporations that it “has created terrifying economic incentives for people to abandon their charming old attachment to their privacy.” In so doing, it ought to change the way we look at the economy in general. “The means of consumption, not the means of production,” Mr. Lewis writes, “are the engine of modern economic life.”

As far as television is concerned, he’s right. As far as society is concerned, Mr. Lewis could use a bit more of the Marxian ideologue in him. For one thing, he’s constantly losing track of what he thinks he believes about the free market. He insists at one point that capitalism has been inevitably softened since the Berlin Wall came down. (Gnutella “fell under the heading CAPITALISM AFTER THE COLLAPSE OF SERIOUS ALTERNATIVES. So long as capitalism was opposed, there could be no truck with experiments in human liberty such as this one.”) Twenty-five pages later, he insists just as firmly that capitalism has been inevitably hardened since the Berlin Wall came down. (“From that moment there was no need to flavor the free market with a dash of something else …. Little pockets of socialism that had been tolerated when socialism posed a threat now, overnight, seemed horribly retrograde.”)

Mr. Lewis insists, for some reason, that technological conditions, including the Internet, change nothing profound–they just give people tools to get what they already desire. “The events I investigated,” he writes, “had occurred because the Internet filled some kind of social hole. If the hole didn’t exist in the first place, the filling up of it never would have happened.” This would seem as wrong–or at least as meaningless–as asserting that the atomic bomb merely “filled some kind of social hole.”

The belief that we use the Internet, rather than vice-versa, is not technological optimism. On closer examination, it looks more like the worst kind of misanthropy. Because it’s tough to think of a harsher accusation to level at humanity than to say that the world of the Information Age–solipsism and shopping for kids, pornography and surveillance for adults–is something we actually wanted.

Christopher Caldwell is senior writer at The Weekly Standard and a columnist for the New York Press.